Deal focus: KaiOS looks beyond the iPhone

India saw smart phone sales reach 32.1 million units during the first three months of 2019, with Xiaomi, Samsung and Vivo accounting for two-thirds of shipments, according to IDC. Less attention is paid to the fact that just as many feature phones were sold in the country. In Africa, smart phones have yet to achieve even level pegging with their less advanced brethren. Of the 215.3 million units shipped during the quarter, 127.1 million were feature phones.

It should come as little surprise that India and Africa are the biggest growth markets for KaiOS Technologies, a Hong Kong-headquartered start-up that develops operating systems for feature phones. The company was established in 2016 and got its initial break from US carriers that wanted to switch off 2G and 3G networks without excluding users – many of them senior citizens – who were wedded to less complicated handsets. KaiOS coordinated with manufacturers to install chipsets in devices that were compliant with its system and 4G connectivity was duly delivered.

There are currently more than 100 million handsets running KaiOS and the company wants to take a larger share of the market that Counterpoint estimates represents 1.5 billion users and a $27 billion commercial opportunity over the next three years. A $50 million Series B round led by Cathay Innovation, a VC affiliate of Cathay Capital Private Equity, will bankroll this ambition. Additional commitments came from Google and TCL Holdings, which backed a $22 million Series A last year.

“We have shipments in more than 100 countries and our goal is to cover most countries around the world by the end of this year,” says Sebastien Codeville, the company’s CEO. “Our priority was North America, but then we entered India and a few more countries in Asia – Vietnam and China are big for us – and we launched in the Middle East and Africa this year. Latin America will come in the summer and we will start exporting to more Asian countries, including Bangladesh and Indonesia, in the second half.”

The global feature phone market is split into roughly equal thirds between Asia Pacific, the Middle East and Africa, and Latin America, North America, and Europe. Based on significant growth in India and Africa in 2018, KaiOS is targeting 150 million users by the end of the year. 

The major challenge for the company is customizing products for very different markets. In Africa, for example, KaiOS works with WhatsApp and Facebook, but it also teamed up with a local developer on an app that provides access to education and health resources. KaiOS wants to do more of the same, but it’s a long-term effort.

“We put in place tools for local developers to build apps. And we use web-based technologies – not like Android or iOS where it’s native app development – so that anyone who designs a website can design an app for KaiOS because we use the same interface,” says Codeville. “We need to grow a healthy ecosystem.”   

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• Topics
• Greater China
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